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Stories from SlateThe End of the Unpaid Internshiphttp://www.slate.com/articles/news_and_politics/jurisprudence/2013/06/black_swan_interns_case_internships_should_be_paid.html
<p>Summer brings an annual invasion, in nearly every line of work, of shiny new interns. They're eager to fill out r&eacute;sum&eacute;s and make contacts. That’s what they get instead of money—and so they save their employers about $600 million every year, according to Ross Perlin in his book <a href="http://www.amazon.com/gp/product/1844676862/ref=as_li_ss_tl?ie=UTF8&amp;tag=slatmaga-20&amp;linkCode=as2&amp;camp=1789&amp;creative=390957&amp;creativeASIN=1844676862"><em>Intern Nation: How to Earn Nothing and Learn Little in the Brave New Economy</em></a>.&nbsp;That’s why the free intern bonanza continues <a href="http://www.slate.com/articles/business/moneybox/2012/02/intern_xuedan_wang_sues_harper_s_bazaar_why_don_t_more_unpaid_interns_protest_.html">despite plenty of complaints that it frequently means breaking the law</a>.</p>
<p>Last week, in <a href="http://docs.justia.com/cases/federal/district-courts/new-york/nysdce/1:2011cv06784/385387/163/"><em>Glatt v. Fox Searchlight Pictures</em></a><em>, </em>a federal judge in New York broke up the party. Judge William H. Pauley III ruled that interns on two film production crews, including one from the Academy Award winning <a href="http://www.slate.com/articles/arts/movies/2010/12/nutcracked.html"><em>Black Swan</em></a>, were employees entitled to payment with actual money. By not paying the interns, their employers violated the Fair Labor Standards Act.</p>
<p>Judge Pauley got it right. Much too often interns do work that people ought to earn money doing. The benefits of the intern economy don’t outweigh the pernicious costs: distorted wages, exploitation of interns, a race to the bottom of the wage scale, and an erosion of the law's protections for workers.</p>
<p>The <em>Glatt </em>case exposed how many interns don't meet the &quot;trainee&quot; exception to the general rule that all workers must be paid for their work. Judge Pauley made clear that to qualify as a trainee, an intern has to receive training similar to what would’ve been provided in an educational facility and must do work primarily for his or her own benefit, not the employer's. Also, the intern's work shouldn't be the sort of thing the business would have otherwise had to hire someone to do. The work the <em>Black Swan</em> intern did (getting lunch, filing, running errands, making deliveries) didn’t cut it. About r&eacute;sum&eacute; fodder and networking, the judge said: meh. Those are benefits that paid workers get, too.</p>
<p>But wait a minute, you might say: These interns weren’t tricked. They knew the deal when they signed on and agreed—and perhaps competed—to work for free. But as Judge Pauley pointed out, the Fair Labor Standards Act “does not allow employees to waive their entitlement to wages.&quot; That’s how the law prevents unpaid interns from exerting &quot;a general downward pressure on wages in competing businesses.&quot;</p>
<p>This sort of intrusion in the marketplace is precisely what government should do to regulate commerce. &nbsp;Markets are enormously efficient allocators of resources. But an unregulated market that permits employers to take work for free, and workers to give it, has a dramatic, and unfair, effect.</p>
<p>There are three actors in this drama: employers (who want low labor costs), interns (who will work for free), and workers who need money. Traditionally, employers and interns have joined forces, effectively, to the economic disadvantage of workers. Because of interns, paid entry-level work is scarcer, and some workers lose out. The ones who can't afford to work for free lose out on the training and networking that unpaid interns enjoy. Judge Pauley said that isn't fair and it isn't legal.</p>
<p>This is just one ruling by one U.S. District Court judge, which means it doesn’t apply outside of the Southern District of New York. But the Southern District is one of the nation's most prominent courts and Judge Pauley's reasoning is pretty compelling. &nbsp;The Fair Labor Standards Act can require double damages, and it permits winning plaintiffs to recover their attorney fees. Smart employers with internship programs should look long and hard to make sure they’re really treating their interns as trainees. Already lawsuits against <a href="http://www.reuters.com/article/2012/02/02/us-intern-unpaid-lawsuit-idUSTRE81100P20120202">Hearst</a> and <a href="http://www.nytimes.com/2013/06/14/business/media/two-ex-interns-sue-conde-nast-over-wages.html?_r=0%20">Cond&eacute; Nast</a> allege they haven’t paid their interns the wages they are due. Even where interns got a modest payment, as claimed in the Cond&eacute; Nast case—in which interns at <em>The New Yorker</em> and <em>W Magazine </em>say they were paid less than $1 an hour— they can say they’re owed because they were paid less than the minimum wage.</p>
<p>It's no small irony that the case that could stem the tide of free interns arose from a movie that takes its inspiration from <em>Swan Lake,</em> which centers on a trick and betrayal. Too many internships are tricks played on workers and markets, pretending to be about learning but actually being about running the Xerox and fetching coffee. &nbsp;One hallmark of real work is getting paid for it. Employers and interns everywhere should take the lessons of the <em>Black Swan </em>case to heart.</p>Tue, 18 Jun 2013 14:54:19 GMThttp://www.slate.com/articles/news_and_politics/jurisprudence/2013/06/black_swan_interns_case_internships_should_be_paid.htmlCullen Seltzer2013-06-18T14:54:19ZThe judge who said interns should be paid is right.News and PoliticsThe End of the Unpaid Internship100130618008workinternshipsinternsCullen SeltzerJurisprudencehttp://www.slate.com/articles/news_and_politics/jurisprudence/2013/06/black_swan_interns_case_internships_should_be_paid.htmlfalsefalsefalsePhoto by Niko TaverniseNatalie Portman in <em>Black Swan</em>. Judge William H. Pauley III ruled that interns on two film production crews,&nbsp;including one from the Academy Award winning <em>Black Swan,</em> were employees entitled to payment with actual money.Let Them Be Lawyershttp://www.slate.com/articles/news_and_politics/jurisprudence/2008/07/let_them_be_lawyers.html
<p><em></em> <em> <a href="http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&amp;navby=case&amp;vol=000&amp;invol=07-208">Indiana v. Edwards</a></em>, decided at the end of the Supreme Court term, hasn't gotten a lot of press. Ostensibly, it's about a technical matter of criminal procedure—the Sixth Amendment right to represent yourself in a criminal trial. But the case deserves a close look because at root it's about the nature of human dignity, a term that appears nowhere in the Constitution yet permeates its meaning. Plus, this June sleeper features a lesson by Justice Antonin Scalia to liberals on the court about what civil liberties should mean.</p>
<p>Ahmad Edwards is a schizophrenic. In 1999, he came to the attention of the Indiana police after he tried to steal a pair of shoes from a department store. When he was discovered, he shot at a store security officer and wounded a bystander. </p>
<p>After Edwards' arrest, there were periods of time when his mental illness made him so addled that he could neither understand the charges against him nor aid in his defense. By that measure, he was legally incompetent to stand trial. The state of Indiana spent the better portion of the next six years medicating and treating Edwards so that he might be lucid enough to be found competent. In 2005, a judge finally found that Edwards met that standard.</p>
<p>Competence meant going to trial. Edwards, determined to take his newfound stability out for a spin, asked to represent himself. He told the trial judge that his court-appointed lawyer wasn't spending enough time on the case, wasn't sharing with Edwards legal materials for use in the defense, and wanted to pursue a line of defense with which Edwards didn't agree. In response, the trial judge said that Edwards was &quot;competent to stand trial, but I'm not going to find he's competent to defend himself.&quot; In short, the judge forced Edwards to accept representation by a lawyer Edwards didn't want along with a defense in which Edwards didn't believe.</p>
<p>If that result sounds odd, it should. In 1975, in <em> <a href="http://caselaw.lp.findlaw.com/scripts/getcase.pl?court=US&amp;vol=422&amp;invol=806">Faretta v. California</a>,</em> the Supreme Court held that the Constitution, by operation of the Sixth Amendment's guarantee of the right to counsel in a criminal case, entitles a defendant to represent himself if he &quot;voluntarily and intelligently elects to do so.&quot; <em>Faretta </em>notwithstanding, the Indiana trial judge found Edwards was competent enough to understand the proceedings against him and could assist in his defense but was nevertheless not competent enough<em></em>to represent himself.</p>
<p>By a vote of 7-2, the Supreme Court agreed with the Indiana trial judge. Justice Stephen Breyer, writing for the majority, reasoned that being competent to stand trial, and even to plead guilty, required less mental faculty than being competent &quot;to conduct trial proceedings.&quot; The majority emphasized that mental illness varies by degree and over time and that litigating a case can be a complicated and difficult matter, only more so if the person handling it is mentally ill. With those considerations in mind, Breyer reasoned that a trial judge ought to have the discretion to require a mentally ill defendant to go to trial with an attorney.</p>
<p>Breyer had to contend with <em>Faretta</em>'s reasoning, however, that a defendant's Sixth Amendment right to represent himself is grounded in notions of individual autonomy and, implicitly, human dignity. His opinion concedes that those concerns underpin the right of self-representation. But Breyer found them insufficient when weighed against a different sort of indignity. &quot;The spectacle that could well result from self-representation at trial is at least as likely to prove humiliating as ennobling,&quot; he wrote. &quot;Moreover, insofar as a defendant's lack of capacity threatens an improper conviction … self-representation undercuts the most basic of the Constitution's criminal law objectives, providing a fair trial.&quot; </p>
<p>Justice Scalia, writing in dissent for himself and Justice Clarence Thomas, and channeling <a href="http://en.wikipedia.org/wiki/Ayn_Rand">Ayn Rand</a>, took the opposite view. Even though defendants who represent themselves usually harm their cases, the &quot;choice must be honored out of 'that respect for the individual which is the lifeblood of the law,' &quot; Scalia wrote. He said that the indignity a defendant suffers by making a fool of himself in court is of less concern than &quot;the supreme dignity of being master of one's fate rather than a ward of the State—the dignity of individual choice.&quot; Scalia concluded, &quot;Whatever else may be said of those who wrote the <em>Bill of Rights, </em>surely there can be no doubt that they understood the inestimable worth of free choice.&quot; Could any general counsel to the ACLU have said it better? (Evidently not. Justice Ruth Bader Ginsburg once had that <a href="http://usgovinfo.about.com/od/uscourtsystem/a/bioginsburg.htm">job</a> but sided with the Breyer majority in <em>Edwards</em>.)</p>
<p>In short, Breyer is appalled at the prospect of a mentally ill person being paraded to debase himself in a proceeding he can't intelligently navigate. Scalia is equally dismayed at the <a href="http://en.wikipedia.org/wiki/The_Trial">Kafkaesque</a> prospect of suspending constitutional rights because Important State Officials know best about what makes a fair trial. In the end, Scalia got this one right, and Breyer got it wrong. While both Justices consider the defendant's dignity, Breyer's concern is ultimately about the criminal justice process, while Scalia's is about the individual with skin in the game. </p>
<p>Breyer's majority opinion also has the disadvantage of rendering murky what once was clear in a number of respects. Going forward, mental health evaluators will have the burden of deciding whether some defendants are competent to plead guilty without counsel but aren't competent to plead not guilty on their own. And there is also the unhappy possibility that the court's ruling will primarily serve to conceal from public view the limited capacity of some defendants. A mentally ill defendant who has been found barely competent but can't represent himself despite his wish to do so won't have the opportunity to expose his relative incapacity the same way he might if he were standing up in court. In that manner, compulsory counsel operates not just as a controller of the accused's defense but also as a screen that shields us from the truth of a defendant's limitations. </p>
<p>At the same time there is a heartening aspect of <em>Edwards</em>. The concept of human dignity, explicit nowhere in the Constitution but implicit everywhere, was the touchstone of the court's debate about what the Constitution should mean for defendants like Ahmad Edwards. Breyer and Scalia disagreed about how best to protect his dignity. But they were both asking the right question. If we're to look, for a concept that animates the Constitution's provisions regarding our relationship to our government, we could surely choose worse than &quot;fulfillment of human dignity.&quot; </p>Tue, 29 Jul 2008 21:03:00 GMThttp://www.slate.com/articles/news_and_politics/jurisprudence/2008/07/let_them_be_lawyers.htmlCullen Seltzer2008-07-29T21:03:00ZThe Supreme Court on the dignity of the mentally ill.News and PoliticsThe Supreme Court on dignity.2196271Cullen SeltzerJurisprudencehttp://www.slate.com/id/2196271falsefalsefalseJustice Antonin ScaliaIn Defense of the 9th Circuithttp://www.slate.com/articles/news_and_politics/jurisprudence/2007/07/in_defense_of_the_9th_circuit.html
<p> Conservative critics have made it an article of faith that the U.S. Court of Appeals for the 9<sup>th </sup> Circuit is populated by a bunch of loose cannon, lefty judges. Rush Limbaugh thinks the 9<sup>th </sup> is a &quot;<a href="http://www.rushlimbaugh.com/home/daily/site_030907/content/01125115.guest.html">circus</a>.&quot; Vanderbilt law professor Brian Fitzpatrick recently argued in the <em>Los Angeles Times</em> for breaking up the court to mitigate the effect of its &quot;<a href="http://www.latimes.com/news/opinion/la-oe-fitzpatrick11jul11,0,6274474.story?coll=la-opinion-rightrail">extreme judges</a>.&quot;<a href="http://www.washingtonpost.com/wp-dyn/content/article/2006/11/15/AR2006111501335.html">George Will</a> has urged the creation of two separate Supreme Courts: One to hear 9<sup>th </sup> Circuit cases and the other to hear everything else. Presumably he's joking, but you get the point.</p>
<p>As proof of the 9<sup>th</sup>'s judicial failings, the critics generally stress the court's extra-high rate of review and reversal by the Supreme Court. The numbers, though, tell a less damning story than the alarmist portrayals of the court.</p>
<p>The 9<sup>th </sup>Circuit hears appeals from Alaska, Arizona, Hawaii, Idaho, Montana, Nevada, Oregon, Washington, the territories of Guam and the Northern Mariana Islands, and the granddaddy jurisdiction of them all, California. I had a law school professor who referred to California law as &quot;hot tub law&quot;; part of the disdain for the 9<sup>th&nbsp;</sup>surely derives from national skepticism of all things Left Coast. But set that aside: The main thing is that the states that fall within the 9<sup>th </sup>Circuit represent almost 20 percent of the U.S. population (59.6 million <a href="http://factfinder.census.gov/servlet/GCTTable?_bm=y&amp;-state=gct&amp;-ds_name=PEP_2006_EST&amp;-_box_head_nbr=GCT-T1&amp;-mt_name=&amp;-_caller=geoselect&amp;-geo_id=&amp;-format=US-9&amp;-_lang=en">people</a> out of about 299 million). That means that the 12 other federal circuit courts of appeal split up the remaining 80 percent of the country, making the 9<sup>th </sup>Circuit three times their average size. Consistent with the population weight it carries, the 9<sup>th </sup>Circuit in 2006 accounted for about 18.4 percent of all decided federal appeals cases. Compare that with the 1<sup>st</sup> Circuit, with 4.7 percent of the population and 3.2 percent of decisions, or the 8<sup>th</sup> Circuit, with 6.7 percent of the population and 6.7 percent of decisions. </p>
<p>What percentage of the Supreme Court's docket is comprised of appeals from the 9<sup>th </sup>Circuit? Last term, according to <a href="http://scotusblog.com/movabletype/">SCOTUSBlog</a>, 32.8 percent of the on-the-merits cases that the Supreme Court reviewed from the federal courts of appeals came from the 9<sup>th </sup>Circuit. &nbsp;The numbers from the two previous years are similar, if slightly lower: for the <a href="http://www.scotusblog.com/movabletype/archives/FinalOT04CircuitScorecard.pdf">2004 October Term</a>, 26.8 percent; for the <a href="http://www.scotusblog.com/movabletype/archives/CircuitsFinal.pdf">2005 October Term</a>, 28.1 percent. </p>
<p>So, yes, 9<sup>th </sup>Circuit cases were disproportionately represented in the Supreme Court. Since caseload and population would predict a review rate of 18 percent to 20 percent, the justices heard between one and a half times and twice as many cases from the 9<sup>th </sup>as would have been expected. But because the Supreme Court's docket is small, the number of &quot;extra&quot; cases from the 9<sup>th </sup>is also small: nine for the last term. That's a substantial part of the Supreme Court's docket, which totaled 73 cases last year, 64 of them from the federal courts of appeals. But nine cases represents only 0.1 percent of the 9<sup>th </sup>Circuit's <a href="http://www.uscourts.gov/cgi-bin/cmsa2006.pl">6,387</a> on-the-merits decisions for the 12 months ending in September of 2006. That's a fair measure of judges going nutty only if you think that 0.1 percent is statistically interesting. </p>
<p>Now let's look at how often the Supreme Court decides that the 9<sup>th </sup>got it wrong. Last term, the Supreme Court's reversal rate for 9<sup>th </sup>Circuit cases was 90.5 percent. Yikes—that's huge! <a>But</a> wait, for on-the-merits cases, the Supremes reversed the 3<sup>rd</sup> and 5<sup>th</sup> Circuits almost&nbsp;<em>all</em> of the time <a href="http://www.slate.com#Correct">*</a> last term. Cases from state appellate courts fared no better: They also had a 100 percent reversal rate. Overall, this past term the Supreme Court reversed 75.3 percent of the cases they considered on their merits. The pattern holds true for the <a href="http://www.scotusblog.com/movabletype/archives/FinalOT04CircuitScorecard.pdf">2004</a> and <a href="http://www.scotusblog.com/movabletype/archives/CircuitsFinal.pdf">2005</a> terms as well, when the Supremes had overall reversal rates of 76.8 percent and 75.6 percent, respectively. For those years, the 9<sup>th </sup>was reversed 84 percent and 88.9 percent of the time, or about a case or two more each year than it would have been if it had conformed to the reversal rate of the other circuits. How do one or two cases a year add up to a court run amuck?</p>
<p>It's also not necessarily the case that a higher reversal rate by the Supreme Court means that an appeals court is doing a bad job. The lower court judges may be bad at predicting what the Supreme Court will approve or disapprove. Or they may not care: They may want to test an idea or take a stance that's at odds with the current direction of the Supreme Court. Or they may perceive that existing law, as previously dictated by their own circuit or by earlier Supreme Court decisions, requires a certain outcome, even as they understand the justice may change that law if they take the case for review. </p>
<p>For example, this term the Supreme Court issued its landmark <a href="http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&amp;navby=case&amp;vol=000&amp;invol=05-908">opinion</a>, stemming in part from a 9<sup>th </sup>Circuit decision, resolving two school desegregation cases. For a majority of five justices, Chief Justice John Roberts claimed to be upholding the legacy of <em>Brown v. Board of Education. </em>In his dissent for the other four justices, Justice John Paul Stevens wrote, &quot;It is my firm conviction that no Member of the Court that I joined in 1975 would have agreed with today's decision.&quot; His point was that on the Supreme Court, getting the law &quot;right&quot; may have as much to do with getting the votes of five justices as it does with parsing decades of precedents. <a href="http://www.newyorker.com/talk/comment/2007/06/25/070625taco_talk_toobin">Jeffrey Toobin</a> persuasively made a similar argument about the many 5-4 splits this term. </p>
<p>In the end, the positions the lower appeals courts take and the ones the Supreme Court hands down is that the Supremes get the final say. That's why you hear constitutional law professors emphasize that the Supreme Court is right because it's last, not last because it's right. It's worth remembering that when a judge, or a court, is singled out for special criticism.</p>
<p><em><strong> <a>Correction</a>, July 18, 2007:</strong> The original sentence incorrectly stated that the Supreme Court revered the 3<sup>rd</sup> and 5<sup>th</sup> circuits in all cases last term. In fact, the court affirmed one Fifth Circuit on-the-merits ruling. (<a href="http://www.slate.com#Return">Return</a> to the corrected sentence.)</em></p>Mon, 16 Jul 2007 20:09:00 GMThttp://www.slate.com/articles/news_and_politics/jurisprudence/2007/07/in_defense_of_the_9th_circuit.htmlCullen Seltzer2007-07-16T20:09:00ZWhy the federal appeals court from the Left Coast doesn't deserve its bad rap.News and PoliticsIn defense of the U.S. Court of Appeals for the 9th Circuit.2170477Cullen SeltzerJurisprudencehttp://www.slate.com/id/2170477falsefalsefalsePeering Through the Merckhttp://www.slate.com/articles/news_and_politics/jurisprudence/2005/08/peering_through_the_merck.html
<p>On August 19, Merck, the giant pharmaceutical manufacturer, got smacked. In <em>Ernst v. Merck Co.</em>, Carol Ernst sued Merck on the grounds that its pain medication, Vioxx, killed her husband, Robert. Merck denied that Vioxx was the cause of Ernst's death. But after locking horns on the case before a jury of 12 Texans, Merck came away bloodied to the tune of $253.4 million. The verdict will almost surely be dramatically reduced, since punitive damages in Texas are capped. Still, the award will likely go up on appeal to around <a href="http://www.washingtonpost.com/wp-dyn/content/article/2005/08/19/AR2005081900256.html">$26 million</a>. For Merck, with net revenues of about <a href="http://phx.corporate-ir.net/phoenix.zhtml?c=73184&amp;p=irol-SECText&amp;TEXT=aHR0cDovL2NjYm4uMTBrd2l6YXJkLmNvbS94bWwvZmlsaW5nLnhtbD9yZXBvPXRlbmsmaXBhZ2U9MzYxNjczMSZkb2M9MSZudW09Mw">$6 billion</a> a year, that news might have been bad, but palatable. But, due to the long, long line of plaintiffs champing at the bit to sue them, the Texas verdict actually means just one down, <a href="http://aolsvc.news.aol.com/news/article.adp?id=20050817013709990004&amp;_ccc=2&amp;cid=842">thousands</a> to go. So what's a <a href="http://www.lead411.com/fortune500a.taf">Fortune 100</a> company to do?</p>
<p>Over the coming months, Merck and the lawyers representing Vioxx plaintiffs will have a series of crossing-the-Rubicon decisions to make in this litigation: Each side will have to choose between expensive piecemeal litigation, expensive class-action litigation, expensive settlement, or expensive bankruptcy. And they'll make those choices with precious little information, while their costs spiral upward. So here's a little backgrounder on the calculus behind Merck's and Vioxx plaintiffs' fight-or-flight decision-making.</p>
<p>Merck has so far <a href="http://www.vioxx.com/rofecoxib/vioxx/consumer/index.jsp">insisted</a> that it is not going to settle the Vioxx cases. Rather, it intends to try them one at a time, steadily vindicating its position, clearing its good name, and ultimately persuading the plaintiffs' bar that tangling with Big Pharma, this time, was economically ill-advised. As strategies go, that makes pretty good sense, if they think they can consistently win each of these lawsuits, and especially given the reality of how mass tort cases get litigated and negotiated. While there are thousands of possible Vioxx claimants out there (Merck spent lots of money advertising the drug and <a href="http://www.abc.net.au/news/newsitems/200508/s1442121.htm">sold lots</a> of it, after all), the real threat to the company is actually only posed by a relatively small number of sophisticated, well-financed plaintiffs' law firms.</p>
<p>If you've seen law-firm advertisements on local TV, madly seeking Vioxx clients, you should understand that the local attorneys advertising for that work will very likely do almost none of it. In a series of referral agreements, many of the smaller firms that sign up Vioxx clients will agree to aggregate those cases under the umbrella of larger firms. That estimate of &quot;thousands&quot; of lawsuits, while daunting and real, is therefore a bit of an illusion. If those plaintiffs' firms with large inventories of clients can be persuaded, by a pattern of Merck consistently winning Vioxx trials, to quit the field, Merck can significantly cut its exposure without having to try each of those thousands of lawsuits.</p>
<p>In fairness to the firms representing Vioxx claimants, these referral agreements do help plaintiffs take advantage of the big firms' experience in Vioxx cases. The larger purpose behind the aggregation, though, is the same purpose behind a co-op of any sort: creating market leverage. The firms at the head of these referral chains will, with hundreds or even thousands of cases aggregated, seek some sort of &quot;inventory&quot; settlement with Merck. The plaintiff and defense lawyers in this negotiation will engage in lengthy discussions over the number of claimants included in the inventory, the nature of their illnesses, and the approximate value, if tried, of the whole lot.</p>
<p>Given the plaintiff firms' incentive to settle en masse, the question then becomes why Merck, or any defendant, when confronted with an inventory of such claims, should not pick and choose which to settle. The answer is, they'll try to do just that. Indeed, <a href="http://news.bbc.co.uk/1/hi/business/4189354.stm">early indications</a> in the wake of the <em>Ernst </em>verdict are that Merck may have already begun this shift in strategy—litigating some cases and settling others. </p>
<p>The plaintiffs' firms will try to hold out for a large-scale settlement because they won't want to settle their best cases and be stuck with the expense of trying the least compelling ones. Meanwhile Merck will, for its part, have the twin, and sometimes competing, aims of avoiding paying those weak claims and bringing an end to all the litigation that is distracting the company from its mission (developing and selling medicine) and sapping its assets. Merck has created a <a href="http://www.vioxx.com/rofecoxib/vioxx/consumer/index.jsp">$675 million reserve</a> for defense costs for Vioxx claims, after all. But that reserve is for defending Vioxx suits, not paying out on them.</p>
<p>How settlement negotiations finally play out, given all these competing interests, will be a function of how each of these parties assesses its litigation risks. If the plaintiffs' firms go on to try a handful of cases and win millions of dollars each time out of the box, Merck will be at a serious disadvantage in the negotiation, and individual plaintiffs will be disinclined to settle at almost any price. On the other hand, if plaintiff firms—which only get paid if they win—perceive any given win to be an unlikely proposition, the value of their large inventory of cases will plummet. Merck would view that weakness as a disincentive to settlement.</p>
<p>As in any negotiation, all this uncertainty is ultimately the lubricant of a settlement. Any party who is certain of victory has no need to compromise. In the Vioxx context, one win by one plaintiff—in circumstances that may <a href="http://writ.news.findlaw.com/sebok/20050822.html">not be typical </a> of the whole class of Vioxx plaintiffs—is hardly enough to give the plaintiffs' bar as a whole any certainty about the outcome of Vioxx cases generally. But a few more significant plaintiff's verdicts will tend to alter the psychology of settlement discussions as the parties try to extrapolate this equation:</p>
<blockquote>
<p>(% chance of recovery) x (value per claim) x (number of claims) </p>
<p>+ (transactional costs of litigating a claim) x (number of claims) =</p>
<p>Value of Vioxx Litigation</p>
</blockquote>
<p>There are, by the way, mechanisms available to Merck to resolve its Vioxx problem short of litigating each case until they have all gone away, or paying out settlements until the company has wasted away. They include removing cases, where possible, from state court to federal court, then aggregating those cases in a single federal district court for consolidated pretrial proceedings. That has already happened in <em>In re Vioxx Product Liability Litigation</em>, <a href="http://www.jpml.uscourts.gov/Pending_MDLs/PendingMDL-July-05.pdf">MDL No. 1657</a>, where there are already 1,106 actions pending in the Eastern District of Louisiana. These separate lawsuits will be driven through a uniform pretrial process of discovery that will tee up the cases for trial. At that stage, the MDL judge in Louisiana will send the cases back, for trial, to the federal district courts from whence they came.</p>
<p>Alternatively, Merck could just declare bankruptcy and force its creditors to work through a reorganization plan that would include some level of compensation fixed by the court for Vioxx-related injuries. A.H. Robins Co. did just <a href="http://www.law.virginia.edu/lawweb/lawweb2.nsf/0/b4665ba4d2aa652d85256ae900547f98?OpenDocument">that</a> in Dalkon Shield-related litigation, which allowed that company to emerge from bankruptcy as an attractive takeover target for American Home Products, now Wyeth. And even if Merck does not actually declare bankruptcy, the threat of bankruptcy, and the possibility that many claimants will be left out in the cold or have small recoveries deferred for years, may drive even the most confident plaintiffs to the negotiating table.</p>
<p>Merck may also seek to negotiate, in the context of a nationwide class-action lawsuit, a global settlement of all Vioxx claims. There are already <a href="http://www.thestreet.com/stocks/biotech/10238931.html">120 suits seeking class-action certification</a> pending around the country, and the MDL Court in Louisiana would be the likely forum for such a resolution. Sulzer Orthopedics Inc., since bought by Zimmer Inc., a manufacturer of hip and knee prosthetics, negotiated just such a resolution when it was confronted with massive product-liability claims. That <a href="http://www.sulzerimplantsettlement.com/">settlement</a>—for about $1.1 billion—resolved the claims of more than 25,000 class members. (Full disclosure:<sup></sup>I represent the claims administrator in that class-action settlement.) That process enjoys the virtues of buying nationwide settlement of claims while avoiding bankruptcy. </p>
<p>Regardless of whether Merck is responsible for the injuries it's accused of causing—and those accusations are serious—there isn't any question that the company plays an important role delivering health care to Americans and as an engine of our economy. And while uncertainty may be settlement's friend, too much uncertainty renders even settlement unlikely. Right now, there probably isn't enough empirical evidence from which to &quot;<a href="http://www.slate.com/id/2111894/entry/2112064">thin-slice</a>&quot; a prediction about Merck's future. What we can be sure about, though, is that resolution of Merck's and Vioxx plaintiffs' litigation and economic woes won't come any time soon, and they definitely won't come cheap. </p>Tue, 30 Aug 2005 21:51:00 GMThttp://www.slate.com/articles/news_and_politics/jurisprudence/2005/08/peering_through_the_merck.htmlCullen Seltzer2005-08-30T21:51:00ZDeconstructing the strategy choices facing the Vioxx litigants.News and PoliticsPeering through the Merck.2125301Cullen SeltzerJurisprudencehttp://www.slate.com/id/2125301falsefalsefalse